Rental property accounting needs to be exact, transparent, and well-documented. This doesn’t mean it has to be complicated. You’ll have to keep a careful record of your income as well as your expenses. That’s where it starts.
More importantly, good accounting practices can help you increase your returns.
We don’t know a lot of Kansas City real estate investors who get into the real estate business because they love bookkeeping. But, it’s an important function of increasing the profitability of your properties. Good accounting also keeps you compliant and helps you avoid potentially expensive mistakes.
As Kansas City property managers, we include professional accounting services in everything we do for our owners. Our detailed, accurate, and transparent reporting system keeps you informed. Here are some things for you to think about if you’re managing your own property.
Organize Investment Income and Expenses
Rental property accounting at the simplest possible level means accurately tracking your income and expenses.
At tax time, you’ll be required to demonstrate how much you earned on your rental property and how much you spent maintaining it. This has to be clear, accurate, and transparent. Even if you work with an accountant or a CPA, you’re likely the one who will be collecting the checks and paying for repairs. Make sure you can clearly see what you’re earning and what you’re spending on a monthly, quarterly, and annual basis.
Budgeting and Forecasting for Kansas City Rental Homes
Budgeting is an important part of maximizing your ROI, especially when it comes to budgeting for maintenance, vacancy, and tenant turnovers. It’s a good idea to set aside a maintenance reserve, which will help you prepare for large expenses. Save a portion of your monthly rent in case a new water heater is needed or the air conditioning goes out.
You should also set up a budget for fixed, ongoing expenses like pest control, landscaping, and HVAC seasonal services.
Invest in Reputable Accounting Technology
An excel spreadsheet will only take you so far. There are a lot of great software programs out there, even for individual landlords who only have one property or a handful of homes. If you keep everything digital, you can access it from anywhere in the world, and that can be extremely helpful when emergencies pop up. It should be accessible, clear, and transparent.
If you find yourself having to go to court, for example, you’ll want to be able to share an accounting breakdown for a tenant you’re evicting for nonpayment of rent. Dragging your paper ledger into the court room is not as convenient as printing a spreadsheet.
Consider Professional Kansas City Property Management
There are a lot of excellent reasons to use a professional property management company, and accounting services are one of them. A good Kansas City property management company will provide accounting and keep you in the loop. You should expect monthly financial statements, reports when you need them, and an online portal that allows you to view maintenance invoices, lease documents, and security deposit funds at any time.
We would be happy to talk more about our accounting practices or share additional tips about how to maximize what you earn with good financial management. If you have any questions, please contact us Donley Carver Investment Properties. We lease, manage, and maintain investment properties in Kansas City as well as Liberty, Parkville, Gladstone, and communities North of the River.